Deering Milliken Research Corp. v. Leesona Corp.

• Decision Date: 09 January 1962
• Docket Number: Civ. A. No. 18211.
• Citation: 201 F. Supp. 776
• Parties: DEERING MILLIKEN RESEARCH CORPORATION, Plaintiff, Warren A. Seem, Nicholas J. Stoddard, Frederick Tecce and Harold P. Berger, copartners trading as The Permatwist Company, Intervenor, v. LEESONA CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of New York

201 F. Supp. 776

DEERING MILLIKEN RESEARCH CORPORATION, Plaintiff, Warren A. Seem, Nicholas J. Stoddard, Frederick Tecce and Harold P. Berger, copartners trading as The Permatwist Company, Intervenor, v. LEESONA CORPORATION, Defendant.

Civ. A. No. 18211.

United States District Court E. D. New York.

January 9, 1962.

Brumbaugh, Free, Graves & Donohue, New York City, for plaintiff. Granville M. Brumbaugh, James N. Buckner, Richard A. Lochner, New York City, of counsel.

Robert F. Conrad, Watson, Cole, Grindle & Watson, Washington, D. C., for defendant. Debevoise, Plimpton & McLean, New York City, of counsel.

Herman Goldman, New York City, William J. Fuchs and Obermayer, Rebmann, Maxwell and Hippel, Philadelphia, Pa., for The Permatwist Company.

BYERS, District Judge.

Decision here is required concerning the legal effect to be given to a grant-back provision embodied in a written license to Leesona Corporation, defendant, to make and sell certain inventions. Plaintiff was the licensor and defendant the licensee, the date of the contract being November 23, 1954.

The position of the intervenor, The Permatwist Company, will be the subject of separate comment.

The parties will be referred to as the plaintiff, the defendant, and the intervenor, without regard to certain changes in corporate titles which have occurred during the interval between the date of the agreement and the start of this litigation.

The grant-back aspect of the main contract is contained in Paragraph 3 and has to do with the obligation of the defendant to assign to the plaintiff

"any improvements made on the apparatus or process which is the subject matter of this agreement * * which are acquired by defendant or which come under its control during the term of this agreement together with any and all applications for patent and patents granted thereon. * * *"

Other provisions of the paragraph are reserved for later comment.

Patents claimed by plaintiff under the foregoing:

(a) U. S. Patent #2,864,229, granted to defendant on December 16, 1958, on application filed June 5, 1957. This is referred to as the 229 patent and is for apparatus generally referred to in this cause as the 511 apparatus.

(b) A pending application for a process patent, Serial No. 653,953, filed April 19, 1957, and any patent that may be granted thereon. Speaking generally, the process is the method of operation of the apparatus described in the 229 patent.

The Parties

The plaintiff is a research corporation, organized under the laws of the State of Delaware with its principal place of business in Spartanburg, South Carolina, not engaged in manufacturing; the presently material branch of its activities has to do with thermo-plastic synthetic so-called yarns used in the production of hosiery and fabrics entering into wearing apparel. The plaintiff's income is from royalties paid by its licensees for the use of its inventions.

The defendant is a Massachusetts corporation maintaining a research laboratory in Jamaica, Queens County, in this District, with its principal place of business in Rhode Island. The business of the defendant is the manufacture and sale of machinery and equipment used by mills in the fabrication of hosiery and wearing apparel in which thermo-plastic yarns are used.

The intervenor is a partnership composed of the individuals listed in the title of this cause. It may be thought of generally (in 1954) as a rival of the plaintiff in the design and licensing of mechanical equipment and the attendant processes of operation in the same field of endeavor.

Jurisdiction

The jurisdiction of this court which is uncontested, is based on 28 U.S.C. § 1332; venue attaches by virtue of 28 U.S.C. § 1391(c).

The subject-matter

Discussion of the decisions upon which plaintiff relies would not be appropriate until an understanding be established of the subject-matter of the above license agreement and the patents.

Thermo-plastic yarns are formed from a chemical described as a polyamide; as delivered by the producer they can be worked into many products not presently germane, as well as to the so-called nylon yarn here involved. The adaptation of such synthetic yarn to the requirements of hosiery and fabric manufacturers enlisted the skills of these several parties to the solution of problems which lay in the path of that objective.

The evidence is thought to establish that the raw nylon as delivered by the producer is almost an inert thing. A given filament resembles in appearance a fine string or cord, gray in color and limp rather than rigid. It possesses certain latent possibilities which can be aroused into manifestation by physical means such as the application of heat up to 400° F., dry or wet stretching to soften the filament, and surface pressure to create inner tension.

These measures when properly applied are said to cause a molecular realignment within the filament as a result of which certain latent or potential properties which were dormant in the raw nylon are thus actuated to such an extent that the yarn may ultimately come to assume the crinkly appearance of one composed of the natural fibres of wool or cotton.

Since these manifestations are the result of phenomena occurring within the yarn and hence are invisible, the causes themselves and the precise reactions, are hidden from view; the effects or manifestations, however, are clearly observable and are subject to control. This means that the following theoretical explanations of what probably takes place within the yarn should be tolerated for present purposes, as reflecting this Court's understanding of the relevant testimony.

It is uncontradicted that the changes brought about in the molecular pattern are entirely physical and the chemical formula of the raw nylon is not changed as the result of these several treatments. The introduction of acetic acid into one of the finishing operations is not stated to have changed the chemical constituency of the yarn as originally delivered.

The Twist

The adaptability of nylon yarn to the purposes above referred to, requires the formation in the yarn of what is known as the twist, (also called a crimp) which is a spiral that so functions as to impart the necessary characteristics to the yarn and is thus essential to the desired result; that is to say, the transformation is from the straight rod-like characteristic of the nylon filament into that which causes it to resemble natural yarn.

So much was broadly understood in 1954 at about the time when this agreement was entered into. The generally recognized method for the accomplishment of that purpose involved twisting heated yarn, namely, the fabrication of a torque twist yarn, which became such as the result of its being rotated by mechanical action and then heat treated, after which it cooled and set itself. As the defendant's witness, Dudzik, put it:

"* * * when it goes through the false twist spindle, this temporary twist which was inserted in the heater is removed, and since the yarn is perfectly stable below the spindle, reverse torque forces are set up in the yarn strand, which caused each of the individual filaments to kink * * *."

The plaintiff conceived of a different method to actuate the needed twist, that is, the yarn being under tension, is passed over a heated surface and then bent over a knife blade at an angle, and thence over guides to a feed roll. The pressure exerted on the yarn as it passes over the blade, causes a compression at the point of contact, and creates a tension at the opposite point, and thus the twist is formed in what thereafter is called Agilon yarn.

The importance of these different methods for bringing the twist into existence lies in the fact that the defendant had designed apparatus and processes to make use of the false twist or torque yarns in the production of Fluflon and Superloft yarns, so-called, which were known to the industry at the time when the plaintiff was perfecting and arranging to license its Agilon yarn equipment and processes.

Thus the false twist and the crimpedge elasticized yarns were destined to compete for the market provided by the mills that manufactured hosiery and fabrics. It should be added that the twist according to either process is entirely visible to the naked eye. It causes a filament of yarn to assume the appearance of a helical or coiled spring, and as the ends are pulled apart — stretched — the coils are separated by ever widening uniform spaces, but do not disappear.

Once this twist has manifested itself, the remaining treatment and processes are designed to preserve its presence, and to somewhat control, modify, rectify, or discipline its energies.

Whether the respective physical properties so manifested do indeed differ in essence, cannot be dogmatically asserted; witnesses for both parties stated the belief that there is a difference but whether, if present, it was actually perceived in 1954 by those who were best informed on the subject, cannot be asserted with assurance.

Since the Fluflon and Superloft yarns were lineal descendants, so to speak, of that which was produced by the earlier Hellenca process of Swiss origin, they antedated Agilon yarn, and the preoccupation of the defendant was with the development of such torque twist yarns on their 550 machine. That development however did not result in the creation of a bulk yarn although the product was capable of being used in the manufacture of women's hosiery with results that were not satisfactory in the finished article of wear.

This means that when the license agreement was entered into, the plaintiff was aware of all that had taken place in the development of the torque twist yarns, and arranged with the defendant for the manufacture by it of the Agilon apparatus, with the understanding that the defendant might be induced to perfect and sell the Agilon apparatus despite the achievements of its own 550 machine which treated torque twist yarns.

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